IMPACTfolio - 3rd Quarter Newsletter

And then there was one…one quarter, that is, left in 2018, and if the fourth quarter is anything like the third, we are in store for strong gains. The Q3 was the best quarter the market has seen in nearly 5 years. Not only was the third quarter strong, but September — historically the worst month for the market — actually ended on a positive note, as the S&P 500 managed a gain of just under 0.5%. To put that into perspective, the S&P 500 has had an average return of -0.5% in September over the last 67 years. Additionally, the Dow Jones Industrial Average was up 1.90% this September, also bucking the historically negative trend of September.

Where does the market go from here? This question is at the forefront of everyone’s mind, especially with the economic and political uncertainty currently swirling around. We would not be surprised to see profit taking and a dip in stock prices at the beginning of the 4th quarter due to such a strong 3rd quarter. Articles about October being the “jinx month” have been making their rounds, and it’s true that many infamous market events happened in October, like the crashes of 1929 and 1987, as well as the 500 plus point drop in the Dow in October 1997. Then, there was obviously October 2008. However, despite all of those events, October has historically been a positive month for the market (SPX up 0.9% on average over past 67 years), and has a decent batting average, with 40 Octobers showing a positive return, against 27 times when the market was negative for the month. Beyond the month of October, the fourth quarter will usher in the seasonally strong six-month period of the market, which begins in November. Further, eight of the past ten years have seen positive returns in the fourth quarter, with the S&P 500 returning 7.12% on average in those eight years. The two years the market finished the fourth quarter with losses were 2008 (-22.56%) and 2012 (-1.01%).

Past 10 Years of 4th Quarter Returns for S&P 500

Q4 2008

-22.56%

Q4 2009

5.49%

Q4 2010

10.20%

Q4 2011

11.15%

Q4 2012

-1.01%

Q4 2013

9.92%

Q4 2014

4.39%

Q4 2015

6.45%

Q4 2016

3.25%

Q4 2017

6.12%

Q4 2018

???

All of that being said, as we enter the fourth quarter, we do so with US Equity, as an asset class, continuing to show the best relative strength out of the six broad asset classes we evaluate: US Equity, International Equity, Commodities, Fixed Income, Currencies, and Cash. US Equity has continuously been the top ranked asset class in our Dynamic Asset Level Investing (DALI) tool since August 2016, and over the course of this year has continued to get stronger.

If you would like to become more familiar with our investment or financial planning process, please contact me at your convenience.

To our clients, your 3rd quarter summary statements are now available in the Vault on your personal financial planning website. You can CLICK HERE to access your accounts.

Scott Arnold, CFP®, has been in the financial services industry since 1998. He is the founder of IMPACTfolio. A wealth management firm that specializes in sustainable and IMPACT investing. For more information, visit https://impactfolio.co/

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